As new research shows significant numbers of UK adults do not understand the tax they pay, Liz Booth uncovers a huge opportunity for financial planners to engage with their clients on tax literacy
When it comes to understanding and managing our finances and taxes, a new study has revealed that women lag behind men by a worryingly high margin.
Research from tax-refund firm, Tommy’s Tax, has found that levels of tax knowledge in the UK are generally low across the board, with 36% of British adults admitting that tax is the one topic in life they understand least. Alarmingly, this figure rises to 44% for women, while falling to 29% for men.
Hazel Bowen, a director at Coutts and winner of the 2022 Chartered Financial Planner of the Year award, was unsurprised by the figures:
“As a Chartered financial planner, I have met many individuals – men and women – who do not understand the tax they pay, how it is calculated, or the opportunity to reduce tax.
She believes: “The key issue is inadequate financial education at school. Without this, many individuals will not consider the need to understand their tax and will lack the confidence to explore it.
“For women specifically, some of the knowledge gap will be a consequence of historical gender norms that would typically see men earning more and handling strategic financial decisions for the household, which would lead to women having less exposure to discussions around financial planning and tax.”
Her views are supported by a recent survey from GoCardless, which revealed that 85% of British adults believed that the UK education system should teach more people about how to manage their money.
It also follows comments from UK Prime Minister Rishi Sunak, who suggested maths should be on the curriculum for all school-goers up to the age of 18 – whether this will ever happen, or if financial education would be a significant part of the learning, is uncertain.
The experts from Tommy’s Tax add: “These figures stress the imminent need to bridge this financial literacy gap in the UK.”
In terms of what financial planners can do to help support women and get better levels of understanding, Bowen stresses: “Engagement in financial discussions is key to improving knowledge. The way we articulate the benefits of financial planning will directly impact this.
“Research has shown that women are typically motivated by tangible goals, such as providing for their family, financial security and independence, rather than by the general pursuit of wealth. Reflecting this in the way we promote our services and our approach to client meetings should engage more women and help increase knowledge.”
The Tommy’s Tax study also found that 50% of Brits state that the cost-of-living crisis is crippling their personal finances and that any refund would be a “lifesaver” – this figure increases to 54% of women and falls to just 46% of men in the UK.
Currently, there are mounting external pressures delaying the process for millions of taxpayers across the board, warns Tommy’s Tax. “From the rising number of unregulated, non-HMRC-registered firms who charge enormous fees for tax refunds, to new data revealing that callers with tax queries now wait four times as long to get through to HM Revenue and Customs compared to five years ago, there is a clear desire from Brits to seek assistance following a recent string of tax changes and audits.”
According to SmartPurse, almost two thirds of women in the UK considered their financial planning to be poor or average when it came to sorting the next 12 months, five years, or decade.
“Women face a multitude of structural issues, such as the gender pay gap and the pensions gap. We can clearly see these issues trickle down into financial literacy and, more specifically, knowledge relating to tax,” adds the Tommy’s Tax report.
With the average tax refund for Brits totalling £1,518, alongside recent reports that they are set to fork out an extra £1,800 in rising costs by next year, it is clear that tax literacy has the potential to provide a critical lifeline to those struggling amid the cost-of-living squeeze, it concludes.
Tommy McNally, CEO of Tommy’s Tax, says: “Sadly, it appears clear from our research that some women may feel less confident when it comes to managing their personal tax affairs than men. There must be equal access to education around tax, ensuring that some groups of society don’t miss ou
“Taxes can be boring, confusing and anxiety-inducing, but when armed with adequate and informed knowledge, it could make a real difference to people’s lives.”
Liz Booth is contributing editor of PFP